Madam President, on Monday, before the cloture vote on the motion to proceed to the Marketplace Fairness Act, I came to the floor to discuss the need to reinstate the committee process in the Senate.
I have come to the floor many times over the past few months to talk about the importance of restoring regular order. I know a number of my colleagues share the same concerns. Yet here we are today debating another piece of legislation that has not gone through the full committee. It has not gone through the full committee process, and, once again, it appears we will be getting less than optimal results.
I think the legislation before us is a prime example of why regular order is so essential. The Marketplace Fairness Act is a complicated piece of legislation that deserves more thorough examination.
I think the bill is well-intentioned, and I am not fundamentally opposed to it. But make no mistake, there are problems with this legislation as it is currently drafted, problems that likely could have been avoided if the Finance Committee had been given an opportunity to fully consider the bill.
I also understand the feelings of those who feel otherwise. But the committee chairman offered to have a hearing on a set date, a markup on a set date, and go to the floor. I thought that was a pretty good offer.
I am not here today to talk about the process failures we have had with regard to this legislation. I think I have made that point, and others have as well. Instead, I am going to take a few minutes to talk about just a few of the specific problems I see with this legislation and how I propose to fix them.
I have filed an amendment that would address some of my concerns. I believe my amendment would make this bill more workable for businesses and consumers around the country.
For example, my amendment would implement a 5-year sunset on the taxing authority provided under this legislation. Like I said, this is a complicated bill, and we are not precisely sure what the impact is going to be.
Whenever Congress deals with legislation this complex, unintended consequences are to be expected. I believe we need to ensure that Congress has an opportunity to revisit these issues once we have had a chance to see how this bill is implemented. A 5-year sunset would provide that opportunity, but that is not enough. If we are really serious about preventing unintended consequences, we need to change some of the specific provisions of the bill.
One particular troublesome aspect of this bill is the preemption provision. In order to downplay the need for regular order on this legislation, proponents of the Marketplace Fairness Act have repeatedly claimed that the bill has been around in some form or another for over 10 years. And, in a sense, that is true.
However, none of the previous versions of this bill--including the version that was introduced just 18 months ago--have included a preemption provision.
Specifically, this provision states that this legislation ``shall not be construed to preempt or limit any power exercised by a State or local jurisdiction under the law of such State or local jurisdiction or under any other Federal law.''
At first glance this sounds innocuous, but why was it only added to this latest version of the bill? Why was it not included in previous drafts?
My concern is that this provision seeks to address an issue that the authors of the Streamlined Sales and Use Tax Agreement have been wrestling with for years, which is that States are reluctant to surrender any taxing authority at all.
I always have been a proponent of States rights. I have fought hard to preserve the right of States to regulate issues within their own spheres in a number of contexts. But we need to recognize, with this provision in place, we would be backing up State laws with Federal enforcement. By passing this legislation as it currently stands, we would be essentially signing off on laws that have not even been written yet.
I think it is only reasonable to consider whether we should, after passing this bill, expect more aggressive State sales tax laws to be enacted with the promise of Federal authority to enforce them.
My amendment would help us avoid the potential problems with this preemption provision by simply striking it from the bill. As I stated, this is a new provision that deserves more careful examination before being enacted into law.
If the Finance Committee had been given an opportunity to examine this provision more thoroughly, it is possible these concerns could have been addressed. But that is not the world in which we are living. Under the current circumstances, this provision should be removed from the bill.
I should point out that I am not the only person expressing concern about the potential impact of enforcing new State sales tax laws with Federal authority. That is an important issue.
Earlier this week the Securities Industry and Financial Markets Association released a statement saying:
We believe the impact of this legislation on trade and services has not been adequately explored by Congress. The bill could lead to unexpected costs being passed on to consumers of financial services, including sales taxes on services or state-level stock transaction taxes.
On Monday, I quoted from a letter delivered to Senators from the American Society of Pension Professionals and Actuaries that argued:
The legislation would allow states to impose a financial transaction tax that would apply to American workers' 401(k) contributions and other transactions within workers' accounts.
These are not concerns that can just be cast aside. These are experts in the financial services industry saying there is a set of problems with the way this bill is drafted.
I am not saying the Marketplace Fairness Act will automatically create these new taxes on financial services. But unless we are sure the legislation would prohibit such taxes, we may be handing a blank check of Federal power to States that are becoming increasingly aggressive with regard to tax enforcement.
That is why my amendment requires the Government Accountability Office to study whether, and under what circumstances, the authority granted under this legislation might allow States to impose taxes on financial transactions or retirement contributions.
My amendment provides a simple, straightforward way to address a potentially serious problem with the Marketplace Fairness Act. My amendment would also require the GAO to conduct a study on the costs incurred by remote sellers in complying with the new sales tax requirements that would be imposed by States under this bill.
There are serious questions regarding the economic impact of this legislation. We are talking about a bill that would impose new costs on businesses throughout the country--costs that will most certainly impact the ability of these companies to grow and expand.
I do not need to tell you that these are perilous economic times.
What impact will the Marketplace Fairness Act have on job creation? We simply do not know. This study would help provide us with some answers. But we need to do more to ensure that this legislation will not harm small businesses throughout the country.
Another concern I have with this bill is that it could potentially create a situation in which small remote sellers are routinely audited by multiple States at the same time. This would be a severe impediment to small business growth and job creation. I think we need to ensure that this legislation does not impose administrative burdens that crush small remote sellers under an avalanche of paperwork.
To help address this concern my amendment would institute a 3-year statute of limitations on State audits of remote sellers. This would provide a uniform rule for State sales tax audits, one that mirrors the current Federal statute of limitations in situations where fraud is not alleged.
One of the major driving forces behind this legislation is the fact that over the years, the number of tangible goods purchased over the Internet has increased exponentially. Proponents of the Marketplace Fairness Act believe it is necessary to level the playing field between Internet and brick-and-mortar businesses.
While this is a fair point, it does not address the issues surrounding the sale of digital goods. Digital goods are often consumed in places that are not at the location of either the buyer or the seller. That being the case, applying State sales taxes to the purchase of digital goods presents a number of problems that are simply not contemplated or resolved under this bill.
Some of my colleagues in the Senate have spent time working on legislation in this area. In addition, the Streamlined Sales and Use Tax Agreement has also considered this issue. However, the legislation before us is completely silent on this and other matters.
These issues demand more consideration than will be possible under this bill. That is why my amendment includes a carve-out for digital goods. Exempting digital goods from the sales taxes authorized by this legislation will give Congress an opportunity to examine this matter more fully and provide a solution that makes sense.
Another problem with this legislation is that it does not take into account the costs businesses will face as they transition into this new sales tax system. There is just no way around it. This bill represents a change to longstanding policy that will require many companies to incur additional costs.
For example, as the bill stands as written, businesses that sell into multiple States will likely have to incorporate multiple software packages into their operations or create their own program. Anybody who thinks about it can see that is a big set of problems.
Furthermore, an online retailer will still be required to pay interchange fees on all transactions regardless of whether the amounts transacted represent the tax or the price of the item purchased. My amendment would help to address this problem by providing for compensation for remote sellers that will be required to withhold and remit sales taxes as a result of this legislation.
A simple, fair system of vendor compensation will help businesses overcome the difficulties of transitioning into the new sales tax regime. The amendment would phase out vendor compensation over a 5-year period. It would begin at 10 percent of amounts collected for 2 years, 8 percent of amounts collected for an additional 2 years after that, and then 6 percent of amounts collected for 1 year. I think this is a reasonable provision. I think it would solve a lot of the problems folks are raising on this bill.
This is a simple approach. It would go a long way to ensuring that businesses, particularly small businesses, are not unduly harmed by this legislation. If you hadn't noticed, the common theme running through all of the provisions of my amendment is a desire to protect small businesses. I think we all want to ensure small businesses are allowed to grow, expand, and create jobs. While I do not think the proponents of this bill want to intentionally harm small businesses, I do not think they have done enough to protect them from the burdens this 11-page piece of legislation would impose.
Let me give you one more example. Businesses making less than $1 million a year in remote sales would be exempt from the sales taxes authorized under this legislation. That may sound like a fair concession, but it warrants further examination. First of all, previous versions of the bill set the exemption at $5 million a year. Why has that number been reduced over time? Is it an arbitrary number that sounds good or is there a specific target in mind? These are the questions I have when I look at that number. My concern with placing the exemption at $1 million is it could subject smaller regional companies and individual sellers to sales tax burdens in States where they only do a small amount of business. In our already fragile economy the last thing we want to do is discourage the businesses from growing, expanding, and creating new jobs. My amendment would set the exemption at $10 million a year in remote sales. It would also index the level of the exemption to inflation to ensure it does not shrink as the years go by.
I recognize coming up with the exact definition of a small business is no easy task. Any number we use will necessarily be a rough figure because it has to encompass different industries and different business models. But setting the exemption at $10 million would protect small businesses in a number of different sectors and ensure we are not discouraging expansion and investment in those types of companies.
I have a number of concerns with the Marketplace Fairness Act as it is currently drafted. These are just some of the concerns I have. I have more, but I thought I would at least make these concerns noticeable by talking about them on the floor. My amendment would go a long way toward resolving these concerns. I respect my colleagues who have worked on this legislation over the years. But I want to work with them to improve the bill.
I respect the distinguished Senator from Tennessee, the distinguished Senator from Wyoming, the distinguished Senator from Illinois. They are sincere, they are dedicated, they believe they are right. I wish to work with them to improve this bill. Everyone knows if we pass this bill in its current form the House is not going to take it. So we may be doing a thankless act here rather than working, as legislators should do, to improve the bill, make it acceptable, hopefully make it so both Houses will take it, and the President will sign it. But as you can see, there are simply too many problems and too many unanswered questions surrounding this legislation for me to support it as it is.
As I have stated, I believe these problems could easily be resolved by a simple return to regular order. Indeed, if the Finance Committee had been given an opportunity to fully examine this legislation, many of these problems would undoubtedly have been solved already. There are people who do not want this bill; I understand that. The chairman of the committee does not want this bill. But he was willing, knowing he would lose, to go ahead with a committee markup, a committee hearing, and a committee battle on the floor.
As I said, that is not the world we are living in. Once again, I want to work with my colleagues to improve this bill. I hope they will listen to my concerns and consider the changes my amendment would make. If no changes are made to this legislation, if it is forced through the Senate without any real improvement, I am going to have to vote no. That is not where I want to be, but that is what I would have to do. We have already missed some real opportunities to examine and improve this legislation. I hope we can change course and take a good look at all of these implications surrounding this particular bill.
I ask unanimous consent that the pending amendments be set aside, and that it be in order to call up the following amendments en bloc: Collins 744 or 771; Ayotte 759, as amended; Coats 765; Thune 765, with a GAO study; Thune 778, with a GAO study; Coburn 753; Coburn 767; Thune 743; Lee 768; Ayotte 763; Hatch 754; Portman 772; Cruz 794; Coats 797; Portman 792; Paul 755; Cruz 799; Ayotte 776.
I further ask unanimous consent that each amendment be limited to no more than 1 hour for debate equally divided in the usual form; I further ask consent that following the use or yielding back of time on each of the amendments, the Senate proceed to a vote in relation to each amendment with no intervening action or debate.